SPECIAL SERVICING AGREEMENT
THIS SPECIAL SERVICING AGREEMENT ("Agreement"), made as of this _____ day
of ________________, 199__, by and among the ________ Fund (the "Top Fund") of
Xxxxx Xxxxxxx Investment Company ("FRIC"), each fund of FRIC listed on Appendix
A (as such Appendix may be amended from time to time) and which evidences its
agreement to be bound hereby by executing a copy of this Agreement (such funds
hereinafter called the "Underlying Funds"), and Xxxxx Xxxxxxx Investment
Management Company ("FRIMCo").
W I T N E S S E T H:
WHEREAS, the Top Fund and each of the Underlying Funds are registered as
series of FRIC, an open-end, diversified management investment company under the
Investment Company Act of 1940, as amended.
WHEREAS, the Top Fund and the Underlying Funds have each entered into
agreements with FRIMCo ("Service Agreements") under which FRIMCo provides the
Top Fund and the Underlying Funds transfer agent services and various
shareholder accounting, recordkeeping, shareholder tax accounting, and
shareholder services in return for such compensation as is set forth therein;
WHEREAS, the Top Fund has entered into an underwriting agreement with
Xxxxxxx Fund Distributors, Inc. ("RFD") ("Underwriting Agreement") for the
provision of distribution services in connection with the Top Fund's shares;
WHEREAS, the Top Fund has entered into an Investment Advisory Agreement
with FRIMCo for the provision of investment management services;
WHEREAS, the Top Fund has entered into an Administrative Agreement with
FRIMCo for the provision of administrative services;
WHEREAS, the Top Fund has entered into an agreement with State Street Bank
and Trust Company ("State Street"), and each of the Underlying Funds has entered
into an agreement with State Street ("Custodian Agreement") under which State
Street is to furnish the Top Fund and the Underlying Funds various custodial and
accounting services in return for such compensation as is set forth in the fee
schedule to the Custodian Agreement;
WHEREAS, the Top Fund will provide a means by which the Underlying Funds
can eliminate shareholder accounts which are or would be invested directly in
the Underlying Funds;
WHEREAS, such shareholder account elimination can reduce the fees of the
Underlying Funds due FRIMCo under the Service Agreements and various other fees
and expenses that would otherwise be incurred by the Underlying Funds (such
expenses are referred to herein as "expenses," and any such reduction in
expenses is hereinafter referred to as "Savings");
WHEREAS, the Top Fund will invest its assets exclusively in the Underlying
Funds, except for temporary defensive purposes and cash or cash items necessary
to meet current expenses and redemptions;
WHEREAS, the Board of Trustees of each Underlying Fund, including a
majority of the Trustees who are not interested persons of the Underlying Funds,
has determined that it is reasonable to expect the aggregate expenses, as
described below, of the Top Fund generally to be less than the estimated Savings
to each of the Underlying Funds and each of their classes of shareholders from
the operation of the Top Fund; and such determination by the Board of Trustees
is based on some or all of the following factors, among others as they apply to
each Underlying Fund:
1. The amount of the LifePoints Funds' or Tax-Managed LifePoints Funds'
expenses to be absorbed by each Underlying Fund;
2. The amount of assets invested in each Underlying Fund and each of its
classes of shares by the LifePoints Funds or Tax-Managed LifePoints
Funds;
3. The average and median account sizes for the Underlying Funds, their
classes, and LifePoints Funds or Tax-Managed LifePoints Funds;
4. The rate at which variable expenses are incurred by the LifePoints
Funds or Tax-Managed LifePoints Funds;
5. The rate at which variable expenses are incurred by the Underlying
Funds or Tax-Managed LifePoints Funds and each of their classes;
6. The rate at which fixed expenses are incurred by the LifePoints Funds
or Tax-Managed LifePoints Funds;
7. The rate at which fixed expenses are incurred by the Underlying Funds
and each of their classes;
8. The relationship between variable expenses in the Underlying Funds (and
each of their classes) and variable expenses in the LifePoints Funds or
Tax-Managed LifePoints Funds;
9. The relationship between fixed expenses in the Underlying Funds (and
each of their classes) and fixed expenses in the LifePoints Funds or
Tax-Managed LifePoints Funds;
10. The projected cost of creating and servicing new shareholder accounts
to the LifePoints Funds or Tax-Managed LifePoints Funds and the
Underlying Funds, and each of their classes, and
11. The amount of aggregate expenses and Savings actually experienced by
each class of shareholders of the Underlying Funds and by the
Underlying Fund as a whole during the preceding year, and
WHEREAS, the Board of Trustees of each Underlying Fund, including a
majority of the Trustees who are not interested persons of the Underlying Funds,
has determined that this Agreement will result in an excess of Savings over
aggregate expenses for each class of shareholders of each Underlying Fund, and
for each Underlying Fund as a whole, and that the premises supporting the data
provided to the Board in this regard are reasonable and appropriate.
NOW, THEREFORE, in consideration of the promises and mutual covenants made
herein, it is agreed between and among the parties hereto as follows:
1. THE TOP FUND EXPENSES
FRIMCo will calculate the amounts of the Top Fund's fees and expenses
due itself and State Street and any other person under the Custodian,
Service, Administration and Underwriting Agreements referred to
above, agreements or arrangements with third parties for
recordkeeping and other administrative services, as well as any other
amounts due persons as a result of the Top Fund operations under any
other agreement or otherwise ("Expenses"), excluding non-recurring
and extraordinary expenses. Such non-recurring and extraordinary
expenses include: the fees and costs of actions, suits or proceedings
and any penalties, damages or payments in settlement in connection
therewith, to which the Top Fund may incur directly, or may incur as
a result of its legal obligation to provide indemnification to its
officers, directors and agents; the fees and costs of any
governmental investigation and any fines or penalties in connection
therewith; and any federal, state and local tax, or related interest
penalties or additions to tax, incurred, for example, as a result of
the Top Fund's failure to qualify under Subchapter M of the Internal
Revenue Code, or failure to timely file any required tax returns or
other filings. Under unusual circumstances, the parties may agree to
exclude certain other amounts from Expenses. In addition, FRIMCo will
calculate the estimated Savings to each Underlying Fund and each of
its classes of shareholders.
2. UNDERLYING FUNDS' PAYMENT OF EXPENSES
Subject to paragraph 3, each of the Underlying Funds agrees to pay
the Expenses in proportion to the average daily value of their shares
owned by the Top Fund, provided that no Underlying Fund will pay such
Expenses in excess of the estimated Savings to it ("Excess Expense"),
and provided further that no Underlying Fund shall pay any Expenses
until such time as the Underlying Funds receive a private letter
ruling (the "Ruling") from the Internal Revenue Service ("IRS") to
the effect that such payments shall not result in the payment by any
Underlying Fund of preferential dividends and therefore jeopardize
the Underlying Funds' tax status as a regulated investment company.
The Underlying Funds shall pay such expenses in accordance with
instructions from FRIMCo. Pending receipt of the Ruling, all Expenses
shall be paid pursuant to Paragraph 3 of this Agreement.
3. PAYMENT BY FRIMCo
Pending receipt of the Ruling, all Expenses shall be paid by FRIMCo.
As soon as reasonably practicable after the Ruling is issued, but in
no event more than six months after the IRS issues the Ruling, each
Underlying Fund shall reimburse FRIMCo for the Expenses so paid in an
amount equal to the amount of Expenses such Underlying Fund would
have paid under Paragraph 2 of this Agreement if the provision of
that paragraph requiring the Ruling were not in effect. Regardless of
whether the Ruling is issued, the Top Fund agrees that, at all times,
it will bear any Excess Expense described in Paragraph 2.
4. OPINION OF COUNSEL
At any time any of the parties hereto may consult legal counsel in
respect of any matter arising in connection with this Agreement, and
no such party shall be liable for any action taken or omitted by it
in good faith in accordance with such instructions or with the advice
or opinion of such legal counsel.
5. LIABILITIES
Noparty hereto shall be liable to any other party hereto for any
action taken or thing done by it or its agents or contractors in
carrying out the terms and provisions of this Agreement provided such
party has acted in good faith and without negligence or willful
misconduct and selected its agents and contractors with reasonable
care.
6. TERM OF AGREEMENT: AMENDMENT; RENEWAL
The term of this Agreement shall begin on _________________, and
unless sooner terminated as herein provided, the Agreement shall
remain in effect for one year from that date. Thereafter, this
Agreement shall continue from year to year if such continuation is
specifically approved at least annually by the Board of Trustees of
each Underlying Fund and the Top Fund, including a majority of the
independent Trustees of each such Fund. In determining whether to
renew this Agreement, the Trustees of the Underlying Funds may
request, and FRIMCo will furnish, such information relevant to
determining the past and expected future relationship between the
Savings and Expenses, including information on the amount of Savings
and Expenses actually experienced by each class of shareholders of
each Underlying Fund and each Underlying Fund as a whole during the
preceding year. The Agreement may be modified or amended from time to
time by mutual written agreement between the parties hereto. Upon
termination hereof, outstanding obligations hereunder shall survive.
This Agreement may be amended in the future to include as additional
parties to the Agreement other investment companies for which FRIMCo
serves as investment adviser.
7. ASSIGNMENT
This Agreement shall not be assigned or transferred, either
voluntarily or involuntarily, by operation of law or otherwise,
without the prior written consent of FRIMCo, the Underlying Funds and
the Top Fund. The Agreement shall automatically and immediately
terminate in the event of its assignment without prior written
consent of such Funds and FRIMCo.
8. NOTICE
Any notice under this Agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid,
to the other party at such address as such other party may designate
for the receipt of such notices. Until further notice to the other
parties, it is agreed that for this purpose the address of all
parties to this Agreement is 000 X Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000
-- Attention: President.
9. INTERPRETIVE PROVISIONS
In connection with the operation of this Agreement, the parties may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions are to be signed by all
parties and annexed hereto, but no such provisions shall contravene
any applicable Federal or State Law or regulation. Also, no existing
provision of this Agreement, or interpretive or additional provision
described above, shall be effective if, as a result, FRIC, any Top
Fund or any Underlying Fund would lose its status as a regulated
investment company under Subchapter M of the Internal Revenue Code.
10. STATE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts.
11. CAPTIONS
The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
With respect to any party which is organized as a Massachusetts business
trust, references in this Agreement to the party mean and refer to the Trustees
from time to time serving under its Declaration of Trust on file with the
Secretary of the Commonwealth of Massachusetts, as the same may be amended from
time to time, pursuant to which the party conducts its business. The obligations
of the party hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the party personally,
but bind only the trust property of the party, as provided in said Declaration
of Trust.
With respect to any party which is organized as a Massachusetts business
trust, if the party has more than one series, no series of the party other than
the series on whose behalf an obligation shall have been undertaken shall be
responsible for the obligations of the series, and third parties shall look only
to the assets of that series to satisfy those obligations.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
as of the day and year first above written.
XXXXX XXXXXXX INVESTMENT COMPANY
for the Underlying Funds
*By:
XXXXX XXXXXXX INVESTMENT COMPANY
for the Top Fund
*By:
XXXXX XXXXXXX INVESTMENT
MANAGEMENT COMPANY
By:
* This Agreement has been signed by each party which is a Massachusetts
business trust by its President only in that capacity and not
individually.
APPENDIX A
The following Funds of FRIC are parties to this Agreement, and have so
indicated their intention to be bound by such Agreement as "Underlying Funds" by
FRIC's execution of the Agreement on the dates indicated thereon:
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1 Fees are expressed as a percentage of the average net asset value of Class
Shares held by your Customers during the preceding calendar quarter.
2 Fees are expressed as a percentage of the average net asset value of
Class Shares outstanding during the prior calendar quarter.
3 Fees are expressed as a percentage of the average net asset value of Class
Shares held by your Customers during the preceding calendar quarter.
4 Fees are expressed as a percentage of the average net asset value of Class
Shares outstanding during the preceding calendar quarter.
